Ministry of Finance released ‘Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement’ | Current Affairs | Vision IAS
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Ministry of Finance released ‘Guidelines for Arbitration and Mediation in Contracts of Domestic Public Procurement’

Posted 14 Jun 2024

2 min read

Guidelines aim to streamline the dispute resolution process for domestic procurement by government and its entities and addressing unique challenges faced by government entities with respect to arbitration.

Arbitration

  • Arbitration is a quasi-judicial process in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute
  • It is a type of Alternate Dispute Resolution (ADR), governed by Arbitration and Conciliation Act, 1996 (amended in 2021).

Key Points of the Guidelines

  • Arbitration should not be automatically included in procurement contracts, especially in large contracts.
  • Arbitration may be restricted to disputes valued below Rs. 10 crores.
  • Where arbitration is used, institutional arbitration should be preferred.
  • Mediation under Mediation Act, 2023, should be adopted where possible, in high-value matters.

Challenges faced by Government with respect to Arbitration

  • Government officials’ transferable jobs may limit their deep knowledge, putting them at disadvantage against private parties in arbitration.
  • Arbitrators often lack integrity and collude with private parties.
  • Its informal and binding nature can lead to erroneous decisions and improper application of law.
  • Many arbitration decisions are challenged in high courts, failing to reduce the burden on courts.

Potential Implications of the Guidelines 

  • The restrictions on arbitration, especially for high-value disputes, might deter foreign investors
  • It may complicate the ease of doing business, as India’s ranking in ‘Enforcing Contracts’ remained abysmally low at 163rd (2019) by the World Bank.
  • It may pose obstacles in fulfilling vision of India as an international hub of arbitration.
  • Tags :
  • Mediation
  • Arbitration
  • ADR
  • Public Procurement
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